Previously, in a coordination problem, we introduced the idea of the activity levels in an economy. The activity levels specify how much of each commodity is actually produced at any given time.
We saw that a given set of activity levels might be uncoordinated, and therefore wrong, in the sense that too much of one thing is produced, and too little of another. And if this continues over time then some stocks increase (unnecessarily and wastefully) and some stocks dwindle, until eventually the economy crashes and production stops.
The coordination problem is ultimately a problem of coordinating the total working day of a society, which is the total quantity of hours the entire labouring population can supply per day. Before we can precisely state and solve the coordination problem we need a better understanding of the total working day. So let’s examine this concept a little more closely.
Consider the same example from previously (but where I’ve doubled the activity levels):
This economy has 5 workers. So the workers, as a whole, can in principle supply 5 working hours per hour of clock time. (Imagine them working in parallel together.) Say that the working day is 8 hours. Then the workers can supply 40 hours of labour per working day. So the total working day is 40 hours.
Every individual has a working day. But the society has a working day too, which is simply the aggregate sum of all the individual working days.
The total working day is a hard upper-bound on what an economy can possibly produce. Obviously, the population can decide (or be forced to) work longer each day. And the number of workers can increase, due to population growth or immigration. Nonetheless, once set, the total working day is an ineradicable material constraint on production.
We can break down the working day into the labour time devoted to different concrete activities. How do the 40 hours in our example break down?
From the technology (see Figure 1 above) we know that producing 1 unit each of corn, sugar and iron uses-up 0.7, 0.3 and 0.6 hours of labour respectively. And from the activity levels we know that the economy produces 2 units each of corn, sugar and iron per hour of clock time. In consequence, in every hour of clock time, the economy uses-up 0.7 x 2 = 1.4, 0.3 x 2 = 0.6 and 0.6 x 2 = 1.2 hours of labour time producing corn, sugar and iron respectively. We then simply multiply these hourly coefficients by the length of the total working day to get the final break down:
Figure 2 gives a bird’s eye view of how a society, at any given time, allocates its total labour time. If our example was more complex, and for example, included millions of different commodity types, then we’d get a picture of the total division of labour in society. Such a fine-grained breakdown might be too much detail. So to get an overall picture we might aggregate into industrial sectors. In this simple example, we only have three sectors of production (agricultural, industrial and luxury).
Some obvious points are worth noting. Although we’re producing 2 units of everything we see that more time is spent sewing and reaping corn than extracting and smelting iron. If this economy had 5 million workers, rather than 5, a larger proportion of the population would be agricultural workers (out in the field) than industrial workers (toiling in the factories).
Also noteworthy is that the economy is not operating at full capacity. Of the 40 hours available, only 25.6 hours are actually used, leaving 14.4 unused hours. So the workers “idle” during a portion of the 8-hour working period. (This may, or may not, be a good thing. At this stage, we simply note the fact.)
(As before, the economy crashes soon after exhausting its iron stocks. However, the crisis now happens earlier because the activity levels are twice what they were before. Here, the total working day is misallocated — too much of society’s time is devoted to corn and sugar production, and insufficient time to iron production.)
The total working day is a remarkably simple and powerful concept, but it’s telling how popular economic discourse ignores it.
Economics, especially when presented by politicians and uncritical media, can seem complex and confusing. An approach to cut through the confusion that often works, and gets to the heart of the matter, is to think in terms of the total working day.
For example, pro-capitalist politicians often claim there is “no money” and “society cannot afford” some social good (e.g., food and shelter for the poorest, or health care and high quality education for the masses). This sounds like a ‘natural’ constraint since you can’t spend money you don’t have. That’s common sense.
But money is irrelevant. The real issue is how society decides to allocate its available labour time. And in capitalist societies we often find unused capacity: a substantial number of willing but unemployed workers on one side, and the technical know-how for producing food and shelter on the other. By thinking in terms of the total working day we realise society has sufficient material resources to achieve the social good. So the politician’s statement is especially egregious.
(The underlying reason why “society cannot afford” some social good is normally because the rich and powerful are unwilling to relinquish some of their command of society’s total working day away from production for them (e.g., luxury goods and services) towards production for the mass of the population (e.g., generalised health care). Furthermore, pro-capitalist economic theories perform an important social function by obscuring this fundamental trade-off between different economic classes. But this is a subject for another day.)
However, the material constraint of the total working day cuts both ways.
Marx’s vision of a fully communist society is where everyone may decide to work as much as they wish (“from each according to his abilities”) and have as much as they want (“to each according to their needs”). Once we think in terms of the total working day we realise that, to satisfy a given level of real demand, some quantity of work necessarily must be performed. So Marx’s vision could only be fully realised in the limit where our techniques are so productive we can make whatever we want in no time.
Some Marxists, very unhelpfully, like to jump to this hypothetical limit point and skip over the ineradicable issue of necessary labour time. They avoid the question of how a communist society must continually coordinate the total working day so the necessary labour in fact is performed. As a result, many people, quite naturally, find their vision hopelessly utopian.
In summary, the total working day is the total quantity of hours the entire labouring population can supply per day. It represents a hard limit on what can be produced. It’s a simple but important concept. To solve the coordination problem we will need to allocate (and continually reallocate) the total working day to different activities in the correct proportions.
(Next, we’ll start to investigate what those correct proportions are.)